Weekend Personal Finance Review

Here are some thoughts I had while watching the Red Sox extend their lead over the Yankees to 10.5 games yesterday. I won’t feel comfortable until that’s at least 25 games.

Earlier this week Money, Matter, and More Musings asked What Is The Worth Of *Net Worth* If It Is Not Usable? Here’s an example, “… the current value of your car as defined by [Kelley Blue Book] may be $15,000, but when you actually put the car out for sale, it’s very less likely that you will get the full $15,000 for it.” In my opinion, the value is in that you are still are driving a $15,000 car and get that experience. Even if I could only sell it for $10,000, I’d still have to pay $15,000 to have that experience again. It’s the experience that I’m looking for in a car purchase, not the value of it if I was forced to liquidate it.

The Digerati Life describes the perfect hobby. This hobby of blogging has worked out fairly well for me. One of my other hobbies, a derivative of fantasy baseball, Baseball Mogul, has the following qualities a) it’s free b) teaches me networking skills c) teaches me negotiation skills and d) taught me a lot about budgeting and finances.

Sun’s Financial Diary has some interesting water indexes. In my area, San Francisco, there is considerable concern about a water shortage this coming summer. It might not be a bad to put some investment in this area.

Free Money Finance gives some reasons why renting is better than buying. It’s an age-old question, but I think the math is pretty simple in northern California – you are better off renting most of the time.

Five Cent Nickel reports that Georgia has cracked down on a couple payday loans companies. I think it’s easy to cheer for the justice, but I’m withholding my applause. In my lending with Prosper, I’ve found that there needs to be very high rates for the people with lower credit grades to make it worthwhile for lenders. I suppose the other option is to deny people credit completely, but that seems shortsighted in this society. Lastly, I have to commend the two prosecuted companies for their creativity.

You cannot count your experience in your networth. you may have million-dollar experience but only hard-cash or liquidation value of your possessions counts towards your networth.

hence considering the amount you’d pay to recreate the experience of driving a new car in your networth instead of the liquidation value of your existing vehicle is wrong.

I’m trying to sell my wife’s Nissan Altima. on craigslist, i can see dealers selling the same car for $7k. KBB is over $5k for private party sales. However, no ones offered me more than $3,000 for it. If i counted its worth as anything more than $3k, i’d be deluding myself.

Wealth Building Lessons from an accounting perspective you may be right. However from a practicality perspective it’s just wrong to count the liquidation value of a vehicle.

Why is this? It’s simply because I’m not going to liquidate any of my assets for a long, long time. At that point of liquidation, I’ll probably be liquidating a $100 of car for $25, not something that’s going to impact the bottom line.

Net worth is typical a very business term, but this web site is about personal finance most of the time. This is why I apply my personal situation and don’t factor in the value of a completely liquidated car.

“Average Borrower Pays Back $793 For a $325 Loan”. I don’t think anyone disagrees that the lenders need to be able to charge a premium for the risk of lending to low credit borrowers, but the rates and fees on these place are down right predatory. Most pay day crackdown bills cap the annual percentage at 36%, which seems fair, otherwise people will be trapped with no way escape other than to continue to roll debt with 100 % interest rates forward. Yes, we need to educate also, but intervention is also needed.

Also don’t think that this stuff doesn’t affect us, because it has a negative affect on society as a whole. Just my thoughts.

I understand that those rates are ridiculous. However, look at it from the pay day lenders point of view. They probably have huge defaults. For example, I’m losing money on my Prosper loans at 29% and they are graded E, ahead of “high risk” and “no credit.” If I wanted to make money on the E graded loans, I’d need to charge around 38%. For the high risk and no credits, I’d probably have to charge 50% and 63%.

I don’t really have a solution, but I’m starting to think that pay day lenders are no worse than any other business. If pay day lenders were making so much money from this, they’d be a whole lot more of them and they’d drive the lending rates down like any other free market industry.

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